TiVo decision will be costly for Dish

Last week’s Court decision in favour of DVR company TiVo looks like being mega-costly for EchoStar/Dish Network. The Court ruled that Dish must disable those set-top boxes that infringe on TiVo’s ‘Time Warp’ patent. EchoStar/Dish has requested a stay of the decision pending a further review of the case, but most analysts think Dish will have to cough up or else risk risky penalties.

The question for analysts now is ‘how much’ will disabling or replacing the boxes cost Dish Network. Dish will only say that over the past few years it has already replaced many of its boxes. Tom Eagan, from Collins Stewart, says there could be as many as 3 million boxes that infringe the TiVo patent. At a rough estimate of $250 per box that could be a $750 million bill for Charlie Ergen, says Eagan. The alternative – and lower cost – scenario says that Dish will strike a licensing deal with TiVo, at about $3 a box/annum, or an annual fee of around $117m.

However, Craig Moffett, a senior analyst at Sanford C Bernstein, suggests the numbers could be much less. He says that Dish Network’s formal records back in 2008 showed it had 4 million boxes that could need attention, but confirms that since 2008 Dish has been replacing boxes, and the number could now be between 500,000 and 1 million. That sort of number will not be threat, he says.

What is also not yet known is how long EchoStar/Dish will be able to drag out this latest verdict. The decision is expected to emerge this week, and it could be just 30 to 60 days. But few are expecting an early conclusion. The case, already eight years old, stands to reach the 10-year mark, Craig Moffett adds, because the judge will also have to reconsider whether Dish’s initial software workaround is still infringing on the TiVo patent.

One final poser: Why hasn’t EchoStar/Dish just bought TiVo? With a Market Capitalisation of just $1.2 billion it would seem a sensible – and low cost – option?